Margaret Thatcher: Radical visionary who rescued Britain

The unions’ stranglehold on the economy was broken, while 'Thatcherism’ promoted privatisation, deregulation and an enterprise culture, says Simon Heffer

It is a measure of the continuing impact of Baroness Thatcher on British politics that even today, when they seek to introduce a controversial policy, leaders of both main parties will claim that something similar happened during the Thatcher government.

Today’s Tories, in particular, when accused of inaction, will claim that she, while in opposition from 1975 to 1979, had given no clear outline of what she would do either.

It hardly matters that this is not true, as those of us who were around at the time remember; that they need to justify themselves in this way says it all about Lady Thatcher’s continuing influence not so much as a person, but as an idea.

Because she led the most radical and successful administration in living memory, Lady Thatcher remains an essential point of reference for contemporary politicians.

However much modern Labour politicians may have disagreed with her, they have had no choice but to accept that much of what she did cannot directly be undone if they wish to retain the confidence of the public.

David Cameron’s own desire to stand at a distance from Lady Thatcher when he became leader of the Conservative Party, and sought to impose a creed of “change” on his party, has also been watered down.

Now, as when she was in office, Lady Thatcher divides opinion between passionate admiration and passionate loathing: almost all truly successful politicians do.

The fact is that there are enough people in this country who, with the benefit of perspective, see that what she did was for the long-term benefit of the country: and any politician who says otherwise will not enhance his or her chances of being taken seriously.

It has not just been to annoy her own party that two Labour prime ministers – Tony Blair and Gordon Brown – have entertained Lady Thatcher in Downing Street and sought to draw on her experience. Her political legacy is hard, perhaps, for anyone under the age of 40 to appreciate properly: for no one younger than that can properly remember the state of Britain in the late 1970s, after 35 years of the disastrous post-war consensus.

Britain’s standard of living had improved since the war but had stagnated and gone into reverse during the 1970s.

A country in which unelected trades union leaders had disproportionate power not just to influence government policy, but to call out armies of workers on strike without any democratic process, was one in which the productive sectors of our country were held to ransom and seriously underperforming. She saw that things had to be done differently.

Fundamental to this change was the apparently dry, academic subject of the control of the money supply. Underpinning the post-war consensus – which was not merely a consensus between political parties, but between politicians, management and workers about how the economy should be run – was the idea that at times of economic downturn money should be pumped into the economy by governments.

This idea had been promulgated in the 1930s, at the time of the slump, by the economist John Maynard Keynes, and had been seized on by politicians of both main parties as a way of keeping organised labour in jobs, and therefore quiescent. The actual results were quite different: it led to rampant inflation; caused some businesses to go under at the cost of jobs and livelihoods; and restricted economic growth and competitiveness.

Ironically, the worst offenders had been Conservative governments – Harold Macmillan had lost his entire Treasury team in 1958 because of a disagreement about a reckless increase in public spending, but the real problems started with the “Barber boom” of 1970-72.

Wishing to avoid an economic downturn, Anthony Barber – Chancellor of the Exchequer in Edward Heath’s administration – had been urged by Heath to expand the money supply by 30 per cent per annum. The result was 27 per cent inflation by 1975, once Heath had been thrown out of office, and the International Monetary Fund called in by Labour to help run the economy in the autumn of 1976, when economic meltdown seemed inevitable.

Monetarism – as control of the money supply became known – was therefore more or less orthodoxy by the time the Conservatives under Lady Thatcher won power in May 1979. There needed, however, to be a serious restructuring of the economy beyond this important change.

Much of what was done in those first years of what came to be known as “Thatcherism” has never been undone. First, there was a shift in the burden of taxation from taxes on income – the top rate in 1979 was a debilitating 83 per cent – to taxes on consumption. VAT rose from 8 to 15 per cent.

There was also an end to subsidies for heavy industry and the process of privatisation began – the de-nationalisation of state-owned industries so that they could appeal to private investors for the capital to expand.

This last policy created “popular capitalism”, with millions of people becoming small shareholders. It was also part of the Thatcherite creed to extend ownership of property, and much of the country’s public housing stock was sold to its occupiers.

By their nature, these reforms were irreversible – the case of Railtrack notwithstanding – and are now, nearly 30 years later, accepted as incontestable. So, too, were another set of reforms that were far more controversial, but even more essential to the smooth functioning of British capitalism: those affecting the trade unions.

It was the unions who had done the most to secure Lady Thatcher’s victory in May 1979. The "Winter of Discontent" that preceded her victory had also largely caused it. The electorate had been treated to the spectacle of public services more or less closing down during what had in any case been a cold and harsh winter: as the much-used cliché about the time has it, the dead were unburied in many local authorities because of industrial action.

Rubbish was uncollected and social services threatened; and this came on top of years of excesses affecting the private sector, such as wildcat strikes, flying pickets, and workforces being called out without ballots – by leaders who had sometimes been elected after rigged polls. Three Acts of Parliament in the early 1980s emasculated the unions, forcing them to be more democratic, and making them liable for losses caused by some of their actions.

Despite promises by the Labour Party that these laws would be repealed, they were immediately popular with the public, and in 11 years in office no Labour government has sought to overturn them.

Beyond that, she pursued a programme of deregulation that encouraged enterprise and widened access to the engines of prosperity in the economy. The City of London underwent the “Big Bang” of deregulation in 1986 that helped expand the financial services sector, create scores of thousands of jobs and enhanced upward mobility for classes of workers that had traditionally experienced a glass ceiling in the City, and make London Europe’s leading financial centre.

Tax-cutting was one of the main incentives to growth and the encouragement of enterprise.

By the late 1980s the notion of entrepreneurialism became embedded in British culture for the first time since the 19th century, and there, despite some severe trials, it remains. Margaret Thatcher’s legacy has not, however, remained strong only at home.

The economic message of privatisation and the benefits of the small state spread around the world, not least in the liberated states of the former Soviet bloc after 1989. And it had been her role in international affairs, with Ronald Reagan and Mikhail Gorbachev, that had had such an important influence on bringing the Cold War to an end and bringing down the Berlin Wall.

She had shown not merely resolve in foreign affairs – she had demonstrated that in 1982 at the time of Argentina – but also a vision of liberty and the link between freedom and prosperity that transformed the British economy and would transform many others around the world.

Yet in terms of foreign policy one of her main legacies has been an entrenched Euro-scepticism. Although she was forced out of office in 1990 by colleagues distressed at her opposition to European integration, her line is one that still resonates with large sections of the public – and which, as Gordon Brown is finding over his refusal to have a referendum on the Lisbon treaty, politicians discount at their peril.

Although the Government since 1997 has eroded some of her commitment to the small state, there are strong signs that the public has had enough of the high-taxing, high-spending alternative, and once more her ideas are demanding careful attention by politicians as public services fail.

The framework of ideas in British politics that still endures today are the ideas she promulgated and developed, and departures from them are at the root of much that is wrong with British policy today. In that respect, her legacy is not just static, but is likely to become stronger yet.